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The British pound currency has continued to hold above the 1.2600 level against the US dollar ahead of the important Federal Reserve rate decision this week.
Certainly, sterling has been rising and rising, mainly due to the central bank divergence between the BoE and the Fed, as the Bank of England fight 10 plus percent inflation.
On Tuesday, UK Claimant Count Change for May slumps to -13,000 versus -9,600 expected and 46,000 prior, which gave the British pound a well needed boost.
Also, BoE Monetary Policy Committee (MPC) appointee Megan Greene stated that important not to allow inflation expectations to become de-anchored, which in turn suggested tighter monetary policy and higher rates ahead.
Elliot wave analysis also show that a final correction may have happened and the GBPUSD pair is in the stages of a WXY play, with the final Y wave to create new highs towards 1.3000.
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that traders are growing more bearish despite the recent sharp price reversal.
With 59% of traders are currently bearish and it should be noted that this current sentiment reading is highlighting that sterling still has much scope to trade even higher.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, a clear rising wedge pattern has formed with the GBPUSD pair possible targeting 1.2700.
According to technical analysis, we could also see a rejection from the top of the wedge and rejection extending down towards the 1.2500 level.
GBPUSD Medium-term Technical Analysis
According to the daily time frame it shows that that GBPUSD pair has undergone a classic Elliot wave correction, with a 1,2,3,4,5 wave higher, and ABC correction done.
The WXY sequence is now playing out, we can see a ramp towards the 1.3000 level, following this worrying drop towards 1.2300. Watch out for a big ramp higher if a coming breakout above 1.2700 holds.
